Public Utilities Commission (PUCSL) chairman Dr. Jayatissa. de Costa PC, yesterday said it was able to slash Rs 40 billion in expenses from the Ceylon Electricity Board’s (CEB) cost estimates for 2013, which amount, if not slashed, would have gravely impacted on electricity consumers and government electricity subsidies. “As a result of the Commission’s regulatory interventions, the per unit cost of electricity has been reduced by Rs. 3 and 64 cents,” Dr de Costa said. PUCSL is the country’s power sector regulator.

Dr de Costa said similarly, the PUCSL had successfully reduced Rs 30 billion from CEB cost estimates in the previous year as well.

He said the CEB had estimated that the total electricity demand will be 11 billion units for 2013 and expenses to cover its costs will be Rs 268 billion (average per unit cost Rs 24.47).

“ After assessing this cost estimates, the commission determined that this year’s electricity demand could be supplied without exceeding Rs 228 billion (average per unit cost Rs 20.83),” Dr de Costa said.

He said the CEB later submitted revised cost estimates based on the commission approved cost of Rs 228 billion which is a reduction close to Rs 40 billion from their earlier estimates.

“This is a huge cost saving to the consumers,” Dr de Costa said.

Explaining how the cost cuts were effected, Dr de Costa said the commission had requested the termination of three expired contracts of privately owned thermal plants (Rs 12.9 billion), increase of hydro power generation estimates (Rs 15 billion), reduction of irrelevant CEB overhead costs (Rs 6.5 billion) and a reduction of return on equity for CEB power plants (Rs 5.3 billion) which totaled to Rs 39.7 billion.

He said despite these efforts, a tariff hike was inevitable to defray huge losses from the cost of producing electricity in 2013.

Dr de Costa said the Commission however was optimistic about further reducing losses in future which in turn will lead to a lower tariff. He said out of the estimated CEB expenses of Rs 228 billion, generation costs amount to Rs 186 billion, which is more than 80 percent of the cost.

He said CEB generates electricity from very cheap hydro plants costing around Rs 3 per kwh compared to very expensive diesel fired gas turbines that cost Rs 80 per kwh. Dr Costa said in Sri Lanka, 51 percent of electricity is generated using petroleum products, 28 percent hydro and 15 percent coal.

He said the Commission has taken several steps to control this generation cost such as directing the CEB to implement a transparent generation dispatch (how to utilize generators) using a software which can be audited and transparent.

“In addition, as non conventional renewable energy is cheaper than oil fired plants PUCSL has published a promotional tariff for NCRE plants and proposed loss targets for CEB, where they are bound to achieve transmission and distribution losses that are on par with international benchmarks,” he said.

PUCSL will also engage in public and stakeholder consultation to find solutions to reduce cost of electricity, Dr Costa said.

The Commission has also planned to have a public hearing on the electricity tariff hike on April 4.